Addis Ababa University

College of Business and Economics

Department Of Management
Business Law (MGMT 31 01)

Group members ID

1. Kidist Kassahun .................................BEE/2164/12

2. Mekiya Kedir......................................BEE/4864/12
3. Nahom Mekonnen...............................BEE/3210/12
4. Nati. Million......................................BEE/9763/12
5. Helen Belete.......................................... BEE/6765/12

Submitted to: Instructor: Sewagegne, D.

Submission date ........29 Apr 2023

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 I. Negotiable Instruments

The word negotiable means ‘transferable by delivery’ and the word ‘instruments’ means a
written document by which a right is created in favor of a person. Thus, the term negotiable
instrument literally refers to a document containing rights that can be transferred by delivery.
Similarly, Article 715(1) of Ethiopian Commercial Code of 1960 defines the term negotiable
instruments as any document incorporating a right to an entitlement in such a manner that it is
not possible to enforce or transfer the right separately from the instrument. Based on the
purpose and rights incorporated in the instruments, Article 715(2) of the Commercial Code
categorizes negotiable instruments into three main types, i.e., Commercial Instruments,
[Transferable] Securities and Documents of Title to Goods.

Types of Negotiable Instruments

Commercial Instruments

Commercial instruments are instruments carrying an unconditional order or promise to pay

certain sum in money and include the following: bill of exchange promissory notes, cheques,
travelers cheques and warehouse goods deposited certificate Here, you have to keeping mind
the fact that, generally, commercial instruments represent unconditional order or promise to
pay a sum of money, but warehouse goods deposit certificates do not. In spite of this, the law
assimilates warehouse goods deposit certificates as commercial negotiable instruments.

Transferable Securities

Transferable securities are documents representing financial interests and include the
following share certificates, bonds and debentures, life insurance policies etc.

Documents of Title to Goods

Documents of title to goods are written description, identification of goods authorizing the
holder to receive, hold, and dispose of documents and goods they cover. They include bills of

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lading air way bills, warehouse goods deposit certificates (though they is assimilated to
commercial instruments) etc.

Endorsing and transferring negotiable instruments.

It is capable of being transferred from one person to another by delivery (or endorsement and
delivery) so that the holder of the instrument may sue on it in his own name. If the instrument
is payable to a bearer, it may be transferred by delivery to the transferee. If the instrument is
payable to a specified payee or to his order, it must be endorsed (that is, signed on the back
by the transferor) and delivered to the transferee.

It gives the purchaser for value legal title to the instrument free from any equities or defects
of title of the transferor and any other prior holder of the instrument, so long as the purchaser
had no notice of any such equity or defect in title before the transfer being made.

Endorsement consists of writing (making an order), signing and dating on the instrument. It
can be made at anywhere on the document. It must be unconditional. Endorsement can be
made in variety of ways. It is possible to endorse negotiable instruments in one of the
following forms:

a. Endorsement in Blank

Where the endorser signs only his name without putting the name of the endorsee for the
purpose of negotiating it, then it is called an endorsement in blank. The effect of endorsement
in blank is that it converts the order instruments into bearer. When to order instrument
endorsed in blank, it may simply be negotiated by delivery and the bearer is entitled to its
payment. It remains so until and unless the endorsement in blank is converted in to
endorsement in full by the holder.

b. Endorsement in full

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Where the endorser sings and puts the name of the person to whom or to whose order the
instrument is to be paid, is an endorsement in full. The effect of endorsement in full is that the
instrument can be paid only to the endorsee and can further be negotiated only by his
endorsement.

c. Restrictive or Qualified Endorsement

An endorsement results normally in making the endorsee the owner of the instrument and
confers upon him the right of further negotiation. However, where the right of further
negotiation is, by express word in the endorsement, restricted or prohibited, then the
endorsement is called restrictive endorsement. An endorsement that disclaims or limits
liability on the instrument is called qualified endorsement.

Parties liable for payment on negotiable instruments are classified as either primary parties or
secondary parties. Makers of notes and drawees (acceptors) of drafts are examples of primary
parties. Drawers of checks (or drafts), the payee, and endorsers of any negotiable instrument
are examples of secondary parties. A primary party has unconditional liability for payment of
the instrument according to its terms, whereas the liability of secondary parties is conditional.
To hold a secondary party liable, the holder of the paper must

 present the instrument for payment to the primary party in a proper and timely
manner,
 have the primary party dishonour the instrument, and
 give timely notice of dishonour to the secondary party. Generally, the drawer as a
secondary party must pay even if the conditions of presentment, dishonour, and notice
are not met.

Keep in mind that a person first becomes a holder starting with the payee to whom an
instrument has been issued by either the maker (note) or drawer (draft or check). The payee
who decides to transfer the instrument on may do so by assignment or negotiation.
Negotiation is the preferred way. When an instrument is negotiated, each successive person
who takes the instrument also becomes a holder. As a holder, that person is eligible to obtain
the unique status of a holder in due course. To qualify as a holder in due course, a holder
must take the instrument for value, in good faith, and without knowledge that the instrument

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is defective. A holder who does not qualify as a holder in due course is considered an
ordinary holder and is in the same legal position as an assignee of a contract. It is possible for
a person to gain the rights and privileges of a holder in due course without actually being a
holder in due course. This rule is referred to as the shelter principle. Defences against holders
of negotiable instruments are classified as personal (limited) defences and universal (real)
defences. Personal (limited) defences are good against ordinary holders, assignees, and the
immediate parties to commercial paper, but they are not good against holders in due course.
Universal (real) defences are good against assignees and all holders, including holders in due
course. Personal (limited) defences include

 fraud in the inducement

 lack of consideration
 payment at or before maturity
 lack of delivery of a complete instrument
 unauthorized completion of an incomplete instrument, and
 slight duress.

Universal (real) defences consist of

 fraud in the execution

 forgery
 minority
 material alteration,
 illegality, and
 serious duress.

Under the Federal Trade Commission HIDC rule, if a consumer who buys on credit gives a
seller a negotiable instrument and the seller negotiates the instrument, the person taking the
instrument cannot become a holder in due course. The FTC rule, however, does not apply
when a consumer purchases goods or services and pays by check. The party to whom a check
has been negotiated may qualify as a holder in due course.

Sometimes, as a favour or for some consideration, people lend their names and credit to other
people whose credit rating is doubtful as an accommodation. Some accommodation parties
sign instruments as co makers, others as endorsers. The liabilities of co makers and endorsers

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differ. One who signs as a co maker has primary liability while one who signs as an endorser
has secondary liability.

II. Labor Law: the Ethiopian Labor Proclamation NO.1156/2019

This law applies to employment relations based on a contract of employment that exist
between a worker and an employer including recruitment process. The law provides
extensively for contractual relations, including the elements and forms of a contract of
employment, the duration of contracts of employment, the obligations of parties, among
others.

Condition of work” means the entire field of labour relations between workers and
employers including hours of work, wage, leave, payments due to dismissal, workers health
and safety, compensation to victims of employment injury, dismissal because of redundancy,
grievance procedure and any other similar matters.

1. Probation Period

The maximum duration of probation period which used to be 45 consecutive days has now
been extended to 60 working days in order to give the employer sufficient time to appraise
and better determine the suitability of the employee to a proposed role.

2. Reduction Of Employees

The previous proclamation provided that whenever a reduction of work force takes place, the
employer shall, as much as possible, retain certain protected working groups during reduction
of work force. The protected groups included:

• Those who are disabled by an employment injury in the undertaking;

• Workers’ representatives.

• Expectant mothers

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The Proclamation has now expanded the group to also include disabled persons (as opposed
to the previous protection accorded to persons who suffered only employment injury or
illness) and new mothers whose babies are under four months old.

3. Termination Of Employees

3.1 Termination on the Ground of Absence and Tardiness

One of the pitfalls of the previous proclamation was that it did not provide any indicative
guidelines and/or standards on what is generally considered repeated, unjustified tardiness.

Termination of contract of employment without advance notice (summary dismissal) on the

ground of repeated and unjustified tardiness has now been made clear by defining
unjustifiable tardiness, and specifically setting out the number (eight times within six months
period despite written warning).

Moreover, the Proclamation has made a change in relation to termination of contract of

employment without notice on the ground of absence. The new Proclamation states that the
employer is entitled to terminate an employee immediately if the employee is absent from
work for five days (consecutive or otherwise) within six months period. The previous
proclamation requires the employee to be absent from work without good cause for a period
of five consecutive working days or ten working days in any period of one month or thirty
working days in a year.

3.2 Termination on the Ground of Under Performance

Although the previous Proclamation incorporated under-performance by employees as one

ground justifying termination with notice, it did not provide a standard to measure under-
performance. The new Proclamation, however, clearly states that performance measurement
should either be agreed by a collective agreement or that there should be a regular
performance assessment of employees as well as periodic records of the same.

4. Overtime Work and Payment

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The normal hours of work of maximum 8 hours a day and 48 hours per week remain the
same. The revised Proclamation, however has made some changes in relation to over time
work. In the event of urgent work that needs to be taken care of, the law has permitted for a
maximum of four hours a day overtime work (it was previously 2 hours a day) and 12 hours a
week.

Overtime payment rate has also increased in some cases while the previous rate has been
maintained for other cases:

a) In the case of work done between 6:00 a.m. in the morning and l0:00 p.m. in the
evening, the rate is 1 ½ multiplied by the ordinary hourly rate (it used to be 1 ¼ times
the ordinary hourly rate);
b) In the case of night time work between 10 p.m. in the evening and 6 a.m. in the
morning, the rate is 1 ¾ multiplied by the ordinary hourly rate(it used to be 1 ½ times
the ordinary hourly rate);
c) In the case of work done on weekly rest day and in the case of work done on a public
holiday, the previous rates, respectively, of twice the ordinary hourly rate and 2 ½
multiplied by ordinary hourly have been maintained.
5. Severance Payment

Pursuant to the new Proclamation, a person who, at the time of termination/resignation, is

eligible for pension payment does not have the right to receive severance pay from the
employer. This was one of the most controversial issues in the past regarding which the
Cassation Bench of the Federal Supreme Court gave a binding decision. The Proclamation
has, therefore, incorporated the position of the Cassation Court on this subject.

6. Annual Leave

The 14 working days for the first year of service plus 1 working day for each additional year
annual leave entitlement has now increased to 16 working days plus one working day every
additional two years. Additionally, under the previous law, an employee was entitled to
interrupt his/her annual leave and instead use a sick leave if she/he fell sick during the course
of the annual leave. The revised Proclamation provides for a stringent requirement of being
hospitalized in order to benefit from such a right.

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 7. Parental Leave

The hitherto thirty days pre-natal and sixty days post-natal leave has been changed to thirty
consecutive days pre-natal and ninety consecutive days post-natal leave. Additionally, the
revised Proclamation has introduced paternity leave of three working days with full pay.
Paternity leave was not recognized under the previous proclamation.

8. Minimum wage

There have been recent media reports indicating that the government of Ethiopia is
considering to introduce minimum wage The revised Proclamation does not directly set a
national minimum wage for employees of private organizations/companies. Instead, it gives
mandate to the Council of Ministers to establish and determine the powers and
responsibilities of a Wage Board which shall comprise representatives of the Government,
employees and trade unions together with other stakeholders that will periodically revise
minimum wages based on studies which take into account the country’s economic
development, labor market and other considerations.

A trade union enables Greater Bargaining Power because the threat or actuality of a strike
by a union is a powerful tool that often causes the employer to accept the demands of the
workers for better conditions of employment.

A trade union can compel the management to formulate personnel policies that press for
equality of treatment to the workers. All the labor decisions of the management are under
close scrutiny of the labor union. This has the effect of minimizing favouritism and
discrimination.

Trade unions help in betterment of industrial relations among management and workers by
solving the problems peacefully.

Disputes resolution mechanisms

Claims and disputes resolution includes all processes for resolving a conflict, from
consensual to adjudicative, from consultation/negotiation to litigation. While some disputes
(claims) may best be left to the courts (litigation), some can be resolved by disputing parties,
either by themselves or with help of a third party. If such methods fail, non-binding and
binding arbitration are also available as alternatives to adjudication. Justice, Treasury Board,

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the Canadian Construction Association, other industry associations, various law societies and
the courts themselves all continue to urge the expanded use of alternative disputes /claims
resolution mechanisms as 'preferable' to litigation.

Dispute Resolution (DR) is used to define the full range of dispute (claim) resolution
mechanisms, which includes negotiation, mediation, non-binding and binding arbitration, and
litigation.

Negotiation

Negotiation is a voluntary, non-adjudicative and informal discussion between the contractor

and PSPC to determine what interests they have in common to arrive at a mutually
satisfactory outcome. Every effort should be made to achieve settlement via negotiation.
While much time and effort is required to negotiate a settlement of a claim, it is usually far
less than the time, cost and effort involved in properly preparing and presenting a case to a
mediator, an arbitrator, or the courts.

Mediation

Mediation is an 'assisted' negotiation. It is a voluntary process and involves intervention of a

mutually acceptable, neutral and impartial third party selected either internally or externally.
The mediator assists the parties in structuring the negotiation, maintaining channels of
communication, identifying and clarifying issues, articulating their needs and creating
alternative ideas to resolve the dispute (claim). The mediator assists disputing parties in
voluntarily reaching their own mutually agreed settlement of the issues in dispute. The
mediator has no decision- making powers and cannot impose a resolution on the parties. The
mediation may be a formal meeting or a series of meetings with the mediator 'shuttling'
between the parties, or an informal series of conversations assisted by the mediator.

Arbitration

Arbitration is a procedure used as an alternative to litigation when negotiations and

mediations are unsuccessful. The procedures are established in law under the Commercial
Arbitration Act.

The parties to a dispute appoint one or more persons, who become arbitrator(s), to review the
evidence and arguments of the parties and render a decision (called an award) which is

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binding on the parties. In Ethiopia labor proclamation No 377/96 puts a detailed list of rights
and obligations of these parties. Once an Employment relation is formed there are certain
obligations that are imposed on an employer.

A. Obligations of an Employer
Any employers in addition to special stipulations in the contract of employment have the
following obligations:

1. To provide work to the worker according to the contract of employment.

2. To provide him with materials and implements necessary for the performance of the work.
3. To pay the worker wages and other necessary payments that should be made.
4. To respect the worker’s human dignity.
5. To take all the necessary occupational safety and health measures and to abide by the
standards and directives given by the appropriate authorities in respect of these measures.
6. To cover the cost of medical examination of the worker whenever such medical
examination required.
7. To give the worker, weekly rest days’ public holidays and leave.
8. When the contract of employment is terminated or whenever the worker so requests, to
provide the worker, free of charge, with a certificate stating the type of work he performed,
the length of service and the salary he was earning.

B. Obligations of Workers

Every worker shall have the following obligations:

1. To perform in person the work specified in his contract of employment

2. To follow instructions given by the employer based on the terms of the contract and work
rules
3. To handle with due care all instruments and tools entrusted to him for work.
4. To report for work always in fit mental and physical conditions
5. To give all proper aid when an accident occurs, or an imminent danger threatens life or
property in his place of work without endangering his safety and health.
6. To inform the employer immediately of any act which endangers himself or his fellow
workers or which may prejudice the interests of the undertakings.

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7. To observe the provisions of this proclamation, collective agreements, work rules and
directives issued in accordance with the law.

It is unlawful for a worker to intentionally commit, in the place of work, any act which
endangers life and property and to take away property from the work place without the
express authorizations of the employer. If an employee report for work in a state of
intoxication or getting drunk he is trespassing employment law.

III. Banking Business

As Per Proclamation No.592/2008, Banking Business Proclamation “banking business” is

defined as business that consists of the following activities:

Receiving funds from the public through means that the National Bank has declared to be an
authorized manner of receiving funds; using the funds referred in whole or in part, for the
account and at the risk of the person undertaking banking business, for loans or investments
in a manner acceptable by the National Bank; the buying and selling of gold and silver
bullion and foreign exchange;

the transfer of funds to other local and foreign persons on behalf of the banks themselves or
their customers; the discounting and negotiation of promissory notes, drafts, bills of exchange
and other evidence of debt; Any other activity recognized as customary banking business

Development of Banking in Ethiopia

Banking is relatively a new concept in Ethiopia. The history of banking in Ethiopia can be
traced back to the establishment of Bank of Abyssinia in March 1905 in the premises of Ras
Mekonnen, the present main campus of Addis Ababa University. It was established and
owned by The National Bank of Egypt, an affiliate of the Bank of England, which was given
monopoly position in banking with regard to other foreign banking companies and other
privileges set up a bank. The bank of Abyssinia’s headquarter in a new building was
inaugurated on 1st January, 1910.

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Bank of Abyssinia has opened Branches at Dire Dawa, Gore and Dessie and agencies at
Harrar and Gambella with the construction of Franco-Ethiopia railway.

The bank was purchased by the order of the Emperor from the foreign company and was
chartered on 29th August 1931 as Bank of Ethiopia. During the Italian occupation branches
of Banco di’Italia, Banco di’Roma, Banco di’Napali and Banco Nationale del Lavoro were
established.

In 1941 Barclays Bank and Dominion colonial & overseas came to Ethiopia with the British
troops and organized Banking services in Addis Ababa. They withdraw in 1943 with the
British troop. The same year Banco di Indo China was established.

National and commercial Bank proclamation, August 1942 was entrusted to the state Bank of
Ethiopia for; controlling the issue of currency holding the foreign reserves of the country and
acting as a fiscal agent of the government. Since the economy was highly under –developed
the monetary situation was quite confused and credit was practically non-existent.

In 1945, Agricultural bank was established to help the rehabilitation of the agricultural sector.
Four years later the same was changed as agricultural and commercial bank. On the
recommendation and assistance of the World Bank (the IBRD), the bank was further
converted in 1951 into the development bank of Ethiopia. Imperial Savings and Home
Ownership Public Association (ISHOPA) was established in 1961 as a building society for
encouraging thrift schemes in residential construction by the effective mobilization of the
sources in Ethiopia.

The Banking activity was reorganized in Ethiopia in December 1963. It splits the functions of
Central Banking and Commercial Banking activities, which until this time was carried out by
the State Bank of Ethiopia.

Commercial bank of Ethiopia was incorporated as Share Company with the following
activities and business purposes. (1).The carrying out of all types of banking business and
operations. (2). Attracting public deposits of all kinds including savings and (3). Promoting
the banking habit and facilitating transactions.

On the same year, 1963 Development bank of Ethiopia was reorganized as Agricultural and
Commercial Bank of Ethiopia. On the same year, Ethiopian Investment Corporation (1963)
was established with the objectives of rendering services, which are beyond the scope of the
exiting banking institutions, and conducting all operations incidental to a general investment

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banking business. Addis Ababa Share Company the first private domestic bank was
established in October 1964.

Types of Banks

Broadly speaking, banks can be classified into commercial banks and central bank.
Commercial banks are those which provide banking services for profit. The central bank has
the function of controlling commercial banks and various other economic activities. There are
many types of commercial banks such as deposit banks, industrial banks, savings banks,
agricultural banks, exchange banks, and miscellaneous banks.

1. Deposit Banks: The most important type of deposit banks is the commercial banks.

They have connection with the commercial class of people. These banks accept deposits from
the public and lend them to needy parties. Since their deposits are for short period only, these
banks extend loans only for a short period. Ordinarily these banks lend money for a period
between 3 to 6 months. They do not like to lend money for long periods or to invest their
funds in any way in long term securities.

2. Industrial Banks: Industries require a huge capital for a long period to buy machinery and
equipment. Industrial banks help such industrialists. They provide long term loans to
industries. Besides, they buy shares and debentures of companies, and enable them to have
fixed capital. Sometimes, they even underwrite the debentures and shares of big industrial
concerns. The important functions of industrial banks are:

1. They accept long term deposits.

2. They meet the credit requirements of industries by extending long term loans.

3. These banks advise the industrial firms regarding the sale and purchase of shares and
debentures.

3. Savings Banks: These banks were specially established to encourage thrift among small
savers and therefore, they were willing to accept small sums as deposits. They encourage
savings of the poor and middle class people.

4. Agricultural Banks: These banks meet the credit requirements of the farmers through
term loans, viz., short, medium and long term loans.

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5. Exchange Banks: These banks finance mostly foreign trade of a country. They buy and
sell foreign currency and thus help businessmen in their transactions.

IV. Public Enterprises

The term public enterprise refers to enterprises established under the ownership of the state or
public authorities. However, the particular features of such enterprises are not the same in all
definitions. For instance, International Centre for Public Enterprises has adopted the
following definition:

Any commercial, financial, industrial, agricultural or promotional undertaking-owned by

public authority, either wholly or through majority shareholding - which is engaged in the
sale of goods and services and whose affairs are capable of being recorded in balance sheets
and profit and loss accounts. Such undertakings may have diverse legal and corporate forms,
such as departmental undertakings, public corporations, and statutory agencies, established
by Acts of Parliament or Joint Stock Companies registered under the Company Law.

The public enterprises came into existence as a result of the expanding scope of public
administration. The advent of the concept of welfare state after the Second World War and
the increasing developmental initiative undertaken by Government across the world, the
system of public enterprises was developed.

The government sells goods and services to the common people through the means of a state
owned enterprise system which incorporates the characteristics of both public and private
enterprises. For e.g. the metro train facility for commuting in big cities, developed, managed
and run by the government.

The government operates in the areas which are of basic or strategic importance and also the
areas that require huge investments beyond the scope of private enterprises. The effect of
public enterprise operations on the balance between demand and supply in the economy and
is thus of particular relevance for analysing economic stabilization. promotion of saving has
been a major motive for establishing public enterprises in many developing countries Public

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enterprises also contribute revenue to the government and make other demands on the budget
in the form of current transfers.

Grounds for Dissolution.

An enterprise may be dissolved for any one of the following reasons:

1) The expiry of the life of the enterprise as expired in its establishment regulations;

2) Completion of the venture for which the enterprise was established;

3) Failure of the purpose or impossibility of performance;

4) Loss of 75% of the paid up capital of the enterprise;

5) A decision of the Council of Ministers a acting the existence of the enterprises;

6) Decision of the court declaring the enterprise bankrupt.

In general, public enterprises either are subject to the same tax on profits as are private
enterprises, or are fully exempted. However, in some countries, they are subject to somewhat
different taxation. In some cases, income from industrial or commercial activities of
government departments or ministries is also subject to tax. When the tax is applied to public
enterprises, their liability usually extends only to income from their industrial or commercial
activities. Distinctions between the tax liabilities of public and private enterprises do not
seem to be related to the type of income tax employed that is, to whether the income tax is an
integrated income tax or a corporate profits tax, or whether it is scheduler or global.

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Reference

 Dudely Richardson, Guide to Negotiable Instruments and Bills of Exchange Acts,

Seventh Edition, London Butterworths, 1983.
 FEDERAL NEGARIT GAZETTE OF THE FEDERAL DEMOCRATIC REPUBLIC
OF ETHIOPIA 25th Year No. 89 ADDIS ABABA 5th September, 2019 Proclamation
No. 1156/2019
 Harvard Law Review, Vol. 17, No. 8 (Jun., 1904), pp. 580-588 (9 pages
 Michael Armstrong, (2009)“Armstrong’s handbook of human resource management
practice” 11th edition
 Negotiable Instruments: Definition, Types, and Examples Adam Hayes,April 25,
2023
 Negotiable instruments : problems and materials / by Wayne K. Lewis, Steven H.
Resnicoff p. cm.
 PUBLIC ENTERPRISES LAW PROCLAMATION NO. 25/1992 ABRHAM
YOHANNES FEBRUARY 22, 2011
 Sheldon and Fidler‘s, Practice and Law of Banking, the English Language Book
society and Macdonald and Evans, London, 1982

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